Working with the system

‘The employment separation event" is a catch-all phrase I invented after the Fair Work Act was introduced. It was designed to convey to people the fact that whether a person resigns from their job, is made redundant or is sacked, they can lodge an unfair dismissal claim.

The only way a business can avoid ever being taken for unfair dismissal is by never letting anyone resign, never making anyone redundant and never sacking anyone.

When a person and his or her job are separated, for any reason, if the person feels unhappy about it, it becomes government business.

The person can appeal to Fair Work Australia for “unfair dismissal relief" and a conciliator will hear their story by listing a mediation teleconference of up to two hours’ duration.

The employer is invited, but cannot be forced to take part.

So is our unfair dismissal system terrible, does it inhibit employment and is the Coalition likely to change it if they win office?

According to the Australian Bureau of Statistics, as of 2011, Australia had more than 2.1 million businesses. Over 2 million of these employed less than 20 staff and 1.3 million did not employ any.

This means that since Work Choices was repealed, about 700,000 business owners became subject to the same unfair dismissal legislation that about 100,000 of our largest businesses have been subject to for some time.

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Annualising figures from Fair Work Australia’s last quarterly report suggests there are about 16,250 unfair dismissal applications each year, or over 62 per working day.

So about 800,000 businesses have a 2 per cent chance of being sued for unfair dismissal every year.

Every business sued has a 96 per cent chance of settling the matter at, before or shortly after the mediation teleconference.

Eight out of 10 cases that go to teleconference settle with “go away money" changing hands. Of the cases that settle, about 60 per cent settle for less than $4000 and about 85 per cent settle for less than $8000.

The 4 per cent of cases that don’t settle go to court and employers have a 51 per cent chance of winning.

When assessing whether this system is fair, I ask: do you think that people who are separated from their job, if they feel unfairly treated, should be able to have some sort of recourse?

If the answer is “no", then you are in the “bring back Work Choices" camp and unlikely to be pleased in the foreseeable future. If the answer is “yes", then the system we have now is here to stay.

It is an imperfect system, not without cost – there are occasional decisions from a judge that cause everyone to question their own sanity – but it could be easily improved through infusion of common sense.

While the truth is that people can sack people using simple principles and basic processes, the perception we all have now is that no one can sack anyone no matter what they do. Redundancies and resignations can be managed to eliminate all risk of a claim but employers are just starting to realise that employees can resign or be made redundant and still make a claim.

These perceptions and realisations are damaging to our economy and probably inhibit employment. When workers walk away with redundancies and still make claims, business confidence is reduced.

When managers think they are powerless to address underperformance, it affects productivity. When workplace bullies who should be sacked are not, they remain in the workplace endangering the safety of workers and increase Work Cover premiums for employers.

The poor perception of our unfair dismissal system is a problem in itself. This perception may improve. The need for skills in managing the “employment separation event" should be met by the market. If it doesn’t, the impact on employment could increase.

The current government says it has no immediate plans to change the system, given that a recent review resulted in a few minor tweaks.

Given a return to Work Choices has been ruled out, we can presume that a Coalition government will not remove the ability of any people to access the system.

The wishes of 700,000 small business owners who might desire another exemption are not likely to override the wishes of millions of workers, or people related to workers, who want to have some sort of system in place.

For employers, it seems the only option, for the next few years at least, is to learn how to properly manage an employment separation event.